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Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Energy Devices
Young, David W.
Functional Area(s):
   Management Accounting
Difficulty Level: Beginner
Pages: 1
Teaching Note: Available. 
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First Page and the Assignment Questions:
Energy Devices, purchases energy-saving devices in bulk, repackages them, and sells them to low-income consumers.  Its products consist of shower nozzles that restrict the flow of water, thermostats with timers, and storm windows.

  It is preparing its budget for the upcoming fiscal year.  Preliminary budgeted figures, by product, are shown below:
                                            Shower Nozzles        Thermostats         Storm Windows                Total
Number of items                     8 00                             200                        500                                1,500
Price per item                            $10                             $80                     $100
Total revenue                      $8,000                     $16,000                $50,000                          $74,000
Purchase cost per item                 8                                70                         95         
Total purchase costs             6,400                       14,000                  47,500                             67,900
Allocated fixed expenses
(includes all labor)              27,040                         6,760                  16,900                             50,700
Total costs                          $33,440                     $20,760               $64,400                         $118,600

Profit (loss)                        $(25,440)                    $(4,760)            $(14,400)                        $ (44,600)


1.    What is breakeven for the year?  What concerns, if any, do you have about this breakeven figure?

2.    Given that its preliminary budget shows a sizable loss, EA must consider ways to eliminate this loss.  What budgetary options should management consider?

3.    EA thinks it can increase the sales of its products by advertising in local newspapers, and has decided to spend $1,000 on advertising. To get the most out of its advertising dollar, it has decided to concentrate on one product only. Given financial concerns only, please discuss how it should decide which product to emphasize?

4.    One of the managers of EA has suggested that, since the organization loses so much on shower nozzles, it should discontinue selling them.  What advice would you give EA about this decision?